Consolidated Appropriation Act of 2021 provides optional relief for 2020 and 2021 FSA plans

All of the below are optional and temporary relief and can be added in any combination except that plans cannot have both the grace period and the carryover. The cost to restate the plan is $100 total regardless of any or all of the options chosen. Plan amendments may be retroactive. Any selected changes will be made for both Dependent Care FSA and Health FSA and apply to both 2020 and 2021 where applicable.

A. Mid-Year Election Changes. For any plan year ending in 2021, employees may modify (includes enrollment) their Health FSA and Dependent Care FSA contributions for any reason. Election changes for Health FSAs can be limited to not go below existing contributions or claims. There is no cashout or return of funds and the election is on a going-forward basis so cannot be retroactive. Changes under this scenario can be limited to one time and to apply to a given timeframe such as within the next 30 days. This provision does not apply to insurance elections.

B. 12-month Grace Period. A grace period for a Health FSA or Dependent Care FSA for a plan year ending in 2020 or 2021 may be added and lasts 12 months into the new year. Example: if adding a grace period to a plan that ended December 31, 2020 claims with a date of service through December 31, 2021 can go against the 2020 balance. A grace period assumes that a person is also enrolled in the current plan year.

C. Unlimited FSA Carryover. All unused amounts in a Health or Dependent Care FSA may be carried over after the end of the 2020 plan year. Unused amounts may be carried over after the end of the 2021 plan year and going forward. This rule also applies to Dependent Care FSAs even though carryovers are otherwise not permitted for these accounts. A carryover applies to current employees who are in the plan on the last day of the prior year. Carryover are normally applied in April for plans that end in December to allow closing out of claims.

D. Dependent Care FSA Modification. The Act allows an extra year for children who “aged out” during the ongoing pandemic event. Employers can allow unused Dependent Care FSA amounts for children until they turn age 14, at least through the end of the 2021 plan year.

E. Spend-down of Unused Health FSA Benefits. An employee who stops participating in the Health FSA plan during calendar year 2020 or 2021 may continue to receive reimbursements from unused contributions through the end of the plan year, including any grace period.